Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are flat ahead of todays 8:30AM ET NFP.

AMZN -7% after earnings.

Resistance: 6,100, 6,010, 6,120

Support: 6,040, 6,020, 6,000

There are two key zones on the board today: 6,100 and 6,000. We’d anticipate an SPX move to one of those levels today.

The 0DTE straddle is $40, or 65 bps (ref 6,085). We’ve been railing against the low IV’s in the environment, given the large market swings. In this case, the $40 handle price seems fair, as it lines up with big resistance (6,100-6,120) and support (6,040).

To the upside, 6,100 is a clean resistance line not only because its a big area of longer dated OI, but because it looks like our friend Capital Condor has struck a 0DTE position at 6,110. We also note SPY 610 (SPX 6,120) as a major

call gamma

line.

To the downside, the condor put spread of this rather small ~1-2k contract condor is around 6,040, which is first SPX support for today.

Under there 6k is major support. <6k we are risk off, with an initial target level of 5,950.

The full 0DTE condor is:

• 6,105 x 6,110 call spread
• 6,040 x 6,035 put spread

As you can see on TRACE there are other non-Capital positions around these same levels. The first order impact of this is that these are now stronger support & resistance lines.

The second thing is that it seems the condor is again reversed, meaning Captain appears to be long the condor, not short. This long/short debate sparked a bit of controversy in the options space yesterday, as the Captain seemed to also go long the condor on Wednesday , vs seemingly being short almost every trade before.

Stepping beyond today’s levels, we note that the SPX is pressing back near all-time-highs, and volatility is contracting.

Last Friday we wrote an extensive note about the risk embedded in options positioning, and that we thought there could be one last blow off top before seeing a larger, nasty move lower.

This view was based around metrics like correlation (see COR1M plot, below), which were signaling major equity overbought levels (read last Friday’s note & COR1M area highlighted in blue). What we needed for a risk-off correction was a trigger, and we thought the trigger would come later in Feb. However, Trump served up a bunch of tariff headlines that very afternoon which caused a massive ~3% drop from Friday afternoon (1/31) to Monday AM (2/3).

Now we sit with less of an overbought reading in the top stocks (Mag 7’s nearly all down 5-7%), but the SPX (candles, below) still poised near highs (flat to last Friday’s open).

If traders come out and buy this dip in the big single stock names, that is may form a blowoff top, which would press correlation and other vol readings down to last Friday’s “high alert” levels.

Further, clearing NFP today, and CPI on 2/12 would only add to the fuel to press equities higher, as SPX volatility has plenty of room to contract (adding a vanna tailwind).